Does it Make Dollars and Sense? Examining the Costs of Building Technology

With the growing use of smart-home technologies, mobile-based resident communications and AI, the buy-vs.-build question is coming up in the C-suite, especially with budget season around the corner.

By Marlena DeFalco (MultiHousingNews.com Article) — The multifamily technology landscape is swiftly changing. Consumer trends are reshaping how apartment operators communicate with and service residents and prospective renters. With the growing use of smart-home technologies, mobile-based resident communications and AI, the buy vs. build technology question is being asked more and more at the multifamily executive table—especially with budget season fast approaching.

“Almost a decade ago it made sense for us to build our own technology,” said Ashley Yax, vice president of sales and marketing for Village Green. “We are an entrepreneurial company and innovating our own resident communication platform enabled us to be new and different in the industry at the time. We built and implemented our own resident apps that brought our renters perks and offered them an easy way to submit a service request.”

While the apps are still relevant for a portion of the 40,000 apartment homes fee managed by Village Green, the company began to recognize significant differences between renters at its suburban and urban properties. Specifically, residents at the intown communities are of a younger demographic—Millennials and members of Generation Z—who are seeking a more experience-based lifestyle. According to a Vision Critical study on key consumer trends, Millennials and Gen Z’ers spend 14.8 hours and 15.4 hours a week, respectively, on their smartphones. These are demographics that expect sophisticated mobile apps.

“To best manage our responsibilities to our owners and to our residents, it was time to determine if it made more sense to allocate funds to further enhance our resident communication app in-house or if it was time to buy the technology,” said Yax. “With the technology we had in place, were we able to effectively bring value to both our clients and our residents?”

For its urban communities, Village Green determined it needed to buy technology. Below are two key factors that help lead to their decision.

Managing the Rapid Technology Changes

Technology updates can be frustrating for both users and operators.

If we look at the consumer industry, take the recent Apple 11.3 update for iPhones, iPads and iPod touches as an example. While some of the changes are for fun—like turning yourself in a cartoon or Memoji—the majority are designed to improve the overall user experience. However, the update faced a significant number of undesirable bugs; a quick Google search reveals how consumers felt about the upgrade.

“Personally, if I have a technology that has to constantly be updated, I find will seek out another technology to use instead,” said Yax. “A few updates are okay but if I spend more time experiencing bugs, I will bounce.”

Technology updates can be just as frustrating for operators who build and manage their own technology because of the time needed to design, test and implement needed changes.

“Changes to the guidelines, requirements and new platform features on both iOS and Android can prompt the need for an app update,” said Brian Samson, CTO for Mobile Doorman, which develops custom apps for apartment managers. “It’s imperative to be constantly communicating with Apple and Google to make sure apps are compliant with their policies. The process can be time consuming, even for experts in app development. In any consumer-facing technology is it important to make things easy and familiar to users; to make any updates as subtle and unobtrusive as possible. It all comes down to implementing the most robust overall user experience.”

“With the resident app that we built, our teams are spending upwards of 140 hours a week of human capital,” said Yax. “It’s a huge time investment just to keep it updated and operational across our portfolio. Maintaining app technology is not our main business model so it was important we find a way to reallocate some of those team hours to better align with our business goals.”

Scalability and Integrations

There’s a saying that a rising tide lifts all boats and that applies when operators buy technology.

That’s because technologies from a third-party supplier benefit from good ideas and feedback from other customers. Furthermore, the breadth of services, resources and integrations available in a purchased technology would be extremely time consuming and costly for an in-house team to try to replicate.

A lot of time is needed to ensure that a technology can integrate and interface with property management software and other systems that apartment operators use. There are significant intricacies found within every technology so every integration is different and brings new challenges for a development team.

Integrations proved to be an ‘aha moment’ for Yax and the Village Green team when considering whether to buy or build apps for their urban communities. “We have package management partnerships and certain payment processes in place,” she said. “The time associated with building and testing these integrations would have been significant, if not nearly impossible, for our in-house team to complete. They are already focused on managing the functionality of other key operational procedures and technologies; and that is top priority.”

The buy vs. build decision is one that more apartment operators will undoubtedly face as the technologies needed to provide the experiences residents are demanding grow more sophisticated. In the case of Village Green, at least, score one for buying.

Marlena DeFalco is an account director for LinnellTaylor Marketing, a Denver-based boutique PR and marketing firm serving the multifamily industry.